The crimes that contributed to historic levels of default may be creeping back into the industry, according to the latest quarterly Mortgage Fraud Risk Report from Interthinx.
Based on data for the third quarter, trends are emerging indicating that “fraud for property” (that is, fraud to attain homeownership), once considered to be less dangerous than “fraud for profit,” is returning to the industry.
Analysts reached this conclusion after witnessing increases in two of the four types of fraud tracked. The Employment/Income and Identity Fraud Risk Indices are both up more than 20% over the last year.
A closer examination of fraud for property cases shows that there is usually a network of professional enablers involved in these transactions who encourage borrowers to lie about their qualifications or who lie on their behalf.
They make a commission each time a misrepresented loan closes. Seen from that perspective, Interthinx says it is clear that these frauds are committed for profit.
Since frauds for property sparked the mortgage meltdown as unqualified borrowers began to default in large numbers, it is clear that fraud for property must be identified and addressed going forward with the same urgency as frauds for profit, said Kevin Coop, president of Interthinx.
“In the past, lenders viewed fraud for property as a more benign type of crime than fraud for profit, but when those loans defaulted, everyone learned how dangerous this type of fraud truly is,” Coop said.
“The crimes almost always include an inside party who is reaping a profit on the fraud. The industry must remain alert to shut down these schemes before loans are funded. That will go a long way toward helping our industry, and our country, recover.”
Nevada remains the state with the highest fraud risk, with a mortgage fraud risk index of 254. Its largest population center, Las Vegas, takes over as the most risky metropolitan statistical area, with an index of 273. Arizona is the second riskiest state, with an index of 214, and California is in third place, with an index of 190.
